(The following article is taken from the U.S. Department of State publication Focus on Intellectual Property Rights.)
Intellectual Property Rights and the Pharmaceutical Industry
By Judith Kaufmann
Many claim that more people do not have access to life-saving drugs because of high prices and that patent rights both increase prices and stand in the way of getting treatment to those who need it.
Both of these claims are false.
Drugs that cure AIDS and many other diseases are available precisely because of patent protection. Patent protections encourage research and development by offering the possibility that a pharmaceutical company's investment will be repaid, a powerful incentive to companies to invest millions and millions of dollars into risky research and development of these medications. Without patent protection, other manufacturers could copy new drugs immediately. Since their costs are minimal, they can offer their versions at a reduced price, seriously hurting the ability of the company that developed the drug to recoup its costs.
In addition, those years in which a company's patented products are protected can help generate the funding that makes research into the next generation of drugs possible.
Drug companies are not only doing the research that has helped so many, they are ensuring that drugs reach those most in need through donations. In 2003 alone, the U.S. pharmaceutical industry donated more than $1.4 billion in medicines and services to people in more than 40 least developed countries.
Drug companies also are helping poorer countries through a variety of innovative public-private partnerships. These partnerships include the African Comprehensive HIV/AIDS Partnership in Botswana, in which the government of Botswana, the Bill & Melinda Gates Foundation, and the Merck Company support prevention programs, health-care access, and treatment of HIV/AIDS, with Merck donating two antiretroviral drugs for treatments. The Onchocerciasis Control Program, in turn, has greatly reduced transmission of "river blindness" throughout West Africa by combining a spraying program and the donation of the drug Mectizan by Merck & Co., Inc.
These are but some examples of the ways in which the research-based drug industry has regularly lowered its prices to the poorest nations of the world and has increased drug companies' partnership with governments and with nongovernmental organizations to ensure that drugs reach those in need.
Generic medicines and copycat drugs are not always the answer for those seeking an alternative to a patent-protected drug. Generics, independently developed drugs that contain the same active substance as the original brand-name drug, are marketed in accordance with patent law and identified either by their own brand name or by their internationally approved nonproprietary scientific name. Copycat drugs usually simply copy the original drug manufacturer in the countries with weak intellectual property protection.
Patented drugs often have passed much more rigorous licensing requirements than so-called generics. Why "so-called"? Because not all drugs that claim to be so are identical and not all are subject to the stringent inspection process that guarantees that they contain the same amount of active ingredients and work in the same way. Manufacturers of some of these drugs have not had to invest in the extensive testing required of the research-based industry even before their drug can be marketed. Of course, there are many reliable manufacturers of generic drugs. The United States, for instance, has a thriving generic drug industry, fully regulated and inspected by the U.S. Food and Drug Administration.
Building on the enormous investment already made by the research-based pharmaceutical industry, copycat drugs can lower drug prices, but they do nothing to guarantee that new drugs will be available when they are needed. Copycat drugs do nothing to ensure that scientific innovation translates into new treatments that may be less toxic and more effective. Rather, they reduce incentives to research and thus discourage new products. And make no mistake: The manufacturers of generic or copycat drugs are not in business to be generous; they, too, are reaping profits. Their profits, however, are not being used to further scientific knowledge and find new cures.
Patents are not the problem that people assume them to be, either. A recent study published in Health Affairs found that "in 65 low- and middle-income countries, where four billion people live, patenting is rare for 319 products on the World Health Organization's Model List of Essential Medicines. Only 17 essential medicines are patentable, although usually not actually patented." If this large amount of life-saving drugs is either off-patent (meaning that the company that originally invented them no longer has an exclusive claim because the patent has expired) or not patented, then patents cannot be the problem in getting drugs to people.
Price is not always the issue, either. When people cite prices as a problem, they often are comparing apples and oranges. Prices include various factors: training of health care personnel in the use of the drug, explanatory materials to make it safer for the consumer, even shipping and handling can be included or not. If one drug seems cheaper but shipping costs are not included, the effective cost may be identical to that of a patented drug. Certainly, a government-sponsored drug company can provide lower prices to the citizens of that country, since the government is paying a large percentage of the actual cost.
There are issues that need to be addressed, including how to encourage even more innovation, especially for drugs with limited markets or which treat diseases mostly prevalent in low- and middle-income countries. Developed countries can offer tax incentives to encourage innovation in such areas, much as the Orphan Drug Bill in the United States does. (This U.S. law, administered by the Food and Drug Administration, deals with medications used to treat diseases and conditions that rarely occur. Since there is little financial incentive for the pharmaceutical industry to develop such medications, "orphan drug status" gives a manufacturer specific financial incentives to develop and provide such medications.) Government research dollars can be used to do basic research, as the National Institutes of Health does in the United States.
Public-private partnerships are showing the way in innovation: The Medicines for Malaria Venture (MMV -- see "Malaria: Partnering to Find a Cure") and the International AIDS Vaccine Initiative (IAVI) are two good examples of such partnerships. MMV, for instance, has 21 drug development projects to ensure that the next generation of treatment is available when drug resistance overtakes current malaria treatment options. As an article in the Washington Post recently suggested, "These entities are in effect nonprofit virtual drug companies configured to discover and develop drugs and vaccines for neglected diseases."
Cheap drugs are no bargain, if they do not cure the disease and if they contribute to drug resistance that may make the drug useless for everyone. Violating or bypassing patent protections is a short-term solution that threatens the long-term health of the world's citizens by removing the incentives and discouraging the innovation we need.
[Judith Kaufmann is a retired foreign service officer, who served as the director of the U.S. State Department's Office of International Health Affairs.]